Why We're Fighting a Trade War with China Over Tires
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It's not the right time. But then, it never is.
It was never the right time for federal regulators to pry into Wall Street's mysterious derivatives and other opaque markets -- that is, until the whole gluttonous enterprise fell. There was never a proper moment to rein in the rapacious subprime mortgage industry before it was too late.
In recent political memory, there has never been a good time to raise the minimum wage, not even in the late 1990s -- when the economy was a gusher of new jobs -- or in 2007, when the inflation-adjusted purchasing power of the minimum wage had fallen to its lowest level since 1955. Though two increases were enacted amid contentious debate, the inflation-adjusted value of the current $7.25 minimum wage is below what it was in 1968.
It goes without saying that there is never a good time to raise taxes, for any purpose.
And now is a very appropriate time to recall these arguments, because we are told that this is definitely not the right time for President Barack Obama to enforce existing trade laws against China for the way it has engineered a surge of cheap tires into the U.S. market.
We are warned this is dangerously protectionist, that it could ignite a global trade war. After all, the Chinese could stop buying our chicken parts. Worse, maybe they will stop buying our Treasury bonds.
Or perhaps it isn't a good time for cash-strapped consumers to pay marginally more for tires due to higher tariffs on these imports. This last assertion is made without irony, ignoring that consumers are squeezed in part because their pay has stagnated or fallen under the ruthless pressure of the global labor market, with its endless supply of low-wage workers.
The castigation is aimed at Obama's decision to impose higher tariffs on Chinese tires -- he followed a recommendation made by the International Trade Commission, an independent body that advises the government on trade. The ITC found that China had violated the law, and it recommended even higher surcharges than those the president set later.
Under a rule China agreed to as part of the deal that allowed its entry into the World Trade Organization, the U.S. can act against Chinese imports if it is found that they cause or threaten "market disruption" for domestic producers.
Four times during the previous administration, the ITC found similar violations; four times President George W. Bush refused to take action.
This is how it has gone for American industries and the workers who depend on them. No trade practices are ever too egregious for those who insist that even limited sanctions are detrimental to the global economy.
In the case of China and tires, the record is clear: The Chinese tire industry is directed to devote most, if not all, of its production to exports. The result is a flood of cheap tires into the U.S., with the Chinese capturing about 17 percent of the market, up from less than 5 percent in 2004. The United Steelworkers, which represents some tire industry workers and brought the complaint that led to the tariffs, says upward of 5,000 domestic jobs have been lost as a result of the Chinese marketing.
The union's involvement leads to the predictable, and undeniable, claim that Obama acted to please a key constituency. So what? The alternative would be for the president to allow unlawful trading practices to continue just to prove he's not out to please organized labor.
But the president's obligation -- to the country, not to the unions -- is to enforce the rules. To do otherwise is to invite more of the disregard for fair trade that has characterized our approach for years, and bled some American industries almost to death.
It is unlikely that any of the tire industry jobs lost to the Chinese onslaught will return. The hope is that at least the unrelenting trend of job losses will slow.
But even this misses the larger point. For too long, the disciples of unfettered free trade -- like those who hector against regulation or anything else that might slow the decline of the American middle class -- have had it wrong. Three decades of fundamentalist faith that markets work best when undisturbed by common-sense rules have culminated in the current Great Recession, in worsening inequality and diminished prospects for American workers.
There comes a time for everything. And the right time to stand against unfair trade is now.